NASDAQ-100 Equal Weighted Index 2025: Price Insights & How It Works

Understanding the NASDAQ-100 Equal Weighted Index

The NASDAQ-100 Equal Weighted Index presents an innovative alternative to the traditional market capitalization-weighted NASDAQ-100. Instead of weighting companies by size, each stock is assigned an equal 1% weight initially, ensuring that smaller companies influence the index as much as the largest ones. This index undergoes quarterly rebalancing and is fully reconstituted every December, maintaining a dynamic and balanced portfolio. Various ETFs track this index, providing investors with accessible options to align with its performance.

Sector Composition and Structure

Excluding financial services, the NASDAQ-100 Equal Weighted Index includes assets from diverse sectors. Technology dominates approximately 40% of the index, reflecting the strength of leading tech companies. Consumer services, including retail giants like Amazon, contribute around 20%, while healthcare, consumer goods, and industrials round out the portfolio. The index uses a modified capitalization approach, limiting the dominance of the largest firms through quarterly reviews and adjustments, fostering a well-distributed exposure across sectors.

Eligibility Criteria for Inclusion

To qualify for the NASDAQ-100 Equal Weighted Index, securities must be exclusively listed on NASDAQ exchanges. Eligible instruments include common stocks, ordinary shares, American Depositary Receipts (ADRs), and tracking stocks. While there is no strict minimum market capitalization, the index focuses on the top 100 largest NASDAQ-listed companies. Liquidity requirements include an average daily trading volume of at least 200,000 shares, and companies must publicly report earnings quarterly and annually. Newly public companies with substantial market caps may also be considered, while firms facing bankruptcy are excluded.

Special Rebalancing Update for 2023

On July 24, 2023, before market open, NASDAQ implemented a special rebalance of the NASDAQ-100 Index to prevent overconcentration without adding or removing companies. This adjustment, based on data from July 3, 2023, aims to maintain balanced weights and ensure the index accurately represents its diverse constituents. Typically, the index undergoes annual reconstitution in December and quarterly rebalancing throughout the year.

Key Differences Between Equal Weighted and Market Cap Weighted NASDAQ-100

Unlike the traditional NASDAQ-100 Index, which weights companies based on market capitalization, the equal weighted version assigns identical weights to each company. This approach diminishes the disproportionate influence of mega-cap firms and amplifies the role of smaller companies in driving index performance.

Investment Options and Benefits

Direct investment in the NASDAQ-100 Equal Weighted Index is not possible; however, investors can access its performance through ETFs and mutual funds designed to track the index. The equal weighting methodology offers diversification benefits by balancing the impact of companies regardless of size, potentially enhancing returns and reducing concentration risk.

Handling Index Changes

When companies enter or exit the NASDAQ-100 Equal Weighted Index, adjustments are made to maintain equal weighting among the remaining firms. This continuous recalibration ensures the index remains balanced and reflective of the evolving market landscape.

Exclusion of Financial Companies

Similar to its market cap-weighted counterpart, the NASDAQ-100 Equal Weighted Index excludes financial sector companies, focusing instead on technology, consumer services, healthcare, and other industries.

Conclusion

The NASDAQ-100 Equal Weighted Index offers investors a balanced exposure to the 100 largest non-financial NASDAQ-listed companies by assigning equal weight to each. This structure empowers smaller companies to significantly influence the index, differentiating it from traditional market cap-weighted indices. With regular quarterly rebalancing and sector diversity led by technology and consumer services, the index provides a compelling option for those seeking diversified growth aligned with NASDAQ’s leading companies.

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